InterContinental Hotels Group Boosts Profits With Gains in the Americas

Dalia Fahmy , Bloomberg

- Aug 02, 2016 10:00 am

Skift Take

The U.S. is London-based InterContinental Hotel Group’s largest region so that helped offset a falloff in France, for example, after the wave of terrorism. Brexit, too, could help IHG trim infrastructure/management costs.

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InterContinental Hotels Group Plc, owner of the Holiday Inn and Crowne Plaza brands, said first-half earnings rose as a resilient U.S. market made up for slowdowns in other regions.

Operating profit before one-time items climbed 2.1 percent to $344 million, with gains in the Americas driving growth, the Denham, England-based company said in a statement on Tuesday. That beat a $332.9 million average estimate by seven analysts in a Bloomberg survey. Revenue fell 8.4 percent to $838 million after the company sold properties in Paris and Hong Kong.

“Despite the uncertain environment in some markets, we remain confident in the outlook for the remainder of the year,” Chief Executive Officer Richard Solomons said in the statement.

Demand for European hotel rooms has been hit by traveler uncertainty in the wake of terrorist attacks in France and an attempted coup in Turkey. Accor SA, Europe’s biggest hotel operator, said last week that first-half profit fell 4 percent partly due to its French business. The Americas region accounts for more than half of InterContinental’s sales.

Operating profit in Europe fell 5.6 percent to $34 million — hurt partly by the sale of the InterContinental Paris Le Grand last year — with revenue per available room in Paris dropping 19.5 percent. In the Middle East, revenue per available room was down 8 percent due to the ongoing impact of low oil prices. In the Americas, profit rose 6.1 percent to $313 million.

“Favorable economic fundamentals and historically modest levels of new supply in the U.S. continue to support growth in our largest region, where demand continues to be at an all-time high,” InterContinental said.

The company said it’s increasing its interim dividend by 9 percent to 30 cents per share.

The U.K.’s vote to leave the European Union may help InterContinental achieve administrative savings, it said.

“With a substantial proportion of our central costs denominated in sterling, we would even benefit at a profit level if the post-referendum sterling exchange rate is maintained,” the company said, noting that only a small portion of its hotels are located in the U.K.

InterContinental, which has about 750,000 rooms in about 100 countries, lost its ranking as the world’s biggest hotel company after a wave of consolidation created increasingly large competitors. Marriott International Inc. completed its acquisition of Starwood Hotels & Resorts Worldwide Inc. this year [Editor’s Note: Marriott’s acquisition of Starwood has not been finalized and awaits antitrust approval from China; it has not yet closed and therefore IHG is still, technically, the world’s biggest hotel company.], and Accor bought the owner of the upscale Fairmont, Raffles and Swissotel brands.

Investors spent $85 billion on hotel deals last year, 50 percent more than in 2014, according to data compiled by Jones Lang LaSalle Inc. InterContinental conducted talks with financial advisers about whether to sell itself or combine with a competitor, people with knowledge of the matter said in November.

(Adds regional results starting in fifth paragraph.)

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net. To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Ross Larsen, Jon Menon

Photo Credit: The lobby/reception in the InterContinental London Park Lane. The hotel chain saw ample profits in the first half of 2016 despite Brexit and terrorism in France and Brussels. InterContinental Hotels Group